Month: May 2018

The Biggest Economic Problem You’re Hearing Almost Nothing About

Not long ago I visited some farmers in Missouri whose profits are disappearing. Why? Monsanto alone owns the key genetic traits to more than 90 percent of the soybeans planted by farmers in the United States, and 80 percent of the corn. Which means Monsanto can charge farmers much higher prices. 

Farmers are getting squeezed from the other side, too, because the food processors they sell their produce to are also consolidating into mega companies that have so much market power they can cut the prices they pay to farmers.

This doesn’t mean lower food prices to you. It means more profits to the monopolists.

Monopolies All Around 

America used to have antitrust laws that stopped corporations from monopolizing markets, and often broke up the biggest culprits. No longer. It’s a hidden upward redistribution of money and power from the majority of Americans to corporate executives and wealthy shareholders.

You may think you have lots of choices, but take a closer look:

  1. The four largest food companies control 82 percent of beef packing, 85 percent of soybean processing, 63 percent of pork packing, and 53 percent of chicken processing.
  2. There are many brands of toothpaste, but 70 percent of all of it comes from just two companies.
  3. You may think you have your choice of sunglasses, but they’re almost all from one company: Luxottica – which also owns nearly all the eyeglass retail outlets.
  4. Practically every plastic hanger in America is now made by one company, Mainetti.
  5. What brand of cat food should you buy? Looks like lots of brands but behind them are basically just two companies.
  6. What about your pharmaceuticals? Yes, you can get low-cost generic versions. But drug companies are in effect paying the makers of generic drugs to delay cheaper versions. Such “pay for delay” agreements are illegal in other advanced economies, but antitrust enforcement hasn’t laid a finger on them in America. They cost you and me an estimated $3.5 billion a year.
  7. You think your health insurance will cover the costs? Health insurers are consolidating, too. Which is one reason your health insurance premiums, copayments, and deductibles are soaring.
  8. You think you have a lot of options for booking discount airline tickets and hotels online? Think again. You have only two. Expedia merged with Orbitz, so that’s one company. And then there’s Priceline.
  9. How about your cable and Internet service? Basically just four companies (and two of them just announced they’re going to merge).

Why the Monopolization of America is a Huge Problem

The problem with all this consolidation into a handful of giant firms is they don’t have to compete. Which means they can – and do – jack up your prices.

Such consolidation keeps down wages. Workers with less choice of whom to work for have a harder time getting a raise. When local labor markets are dominated by one major big box retailer, or one grocery chain, for example, those firms essentially set wage rates for the area.

These massive corporations also have a lot of political clout. That’s one reason they’re consolidating: Power.

Antitrust laws were supposed to stop what’s been going on. But today, they’re almost a dead letter. This hurts you.

We’ve Forgotten History

The first antitrust law came in 1890 when Senator John Sherman responded to public anger about the economic and political power of the huge railroad, steel, telegraph, and oil cartels – then called “trusts” – that were essentially running America.

A handful of corporate chieftains known as “robber barons” presided over all this – collecting great riches at the expense of workers who toiled long hours often in dangerous conditions for little pay. Corporations gouged consumers and corrupted politics.

Then in 1901, progressive reformer Teddy Roosevelt became president. By this time, the American public was demanding action.

In his first message to Congress in December 1901, only two months after assuming the presidency, Roosevelt warned, “There is a widespread conviction in the minds of the American people that the great corporations known as the trusts are in certain of their features and tendencies hurtful to the general welfare.”

Roosevelt used the Sherman Antitrust Act to go after the Northern Securities Company, a giant railroad trust run by J. P. Morgan, the nation’s most powerful businessman. The U.S. Supreme Court backed Roosevelt and ordered the company dismantled.

In 1911, John D. Rockefeller’s Standard Oil Trust was broken up, too. But in its decision, the Supreme Court effectively altered the Sherman Act, saying that monopolistic restraints of trade were objectionable if they were “unreasonable” – and that determination was to be made by the courts. What was an unreasonable restraint of trade?

In the presidential election of 1912, Roosevelt, running again for president but this time as a third party candidate, said he would allow some concentration of industries where there were economic efficiencies due to large scale. He’d then he’d have experts regulate these large corporations for the public benefit.

Woodrow Wilson, who ended up winning the election, and his adviser Louis Brandeis, took a different view. They didn’t think regulation would work, and thought all monopolies should be broken up.

For the next 65 years, both views dominated. We had strong antitrust enforcement along with regulations that held big corporations in check.

Most big mergers were prohibited. Even large size was thought to be a problem. In 1945, in the case of United States v. Alcoa(1945), the Supreme Court ruled that even though Alcoa hadn’t pursued a monopoly, it had become one by becoming so large that it was guilty of violating the Sherman Act.

What Happened to Antitrust?

All this changed in the 1980s, after Robert Bork – who, incidentally, I studied antitrust law with at Yale Law School, and then worked for when he became Solicitor General under President Ford – wrote an influential book called The Antitrust Paradox, which argued that the sole purpose of the Sherman Act is consumer welfare.

Bork argued that mergers and large size almost always create efficiencies that bring down prices, and therefore should be legal. Bork’s ideas were consistent with the conservative Chicago School of Economics, and found a ready audience in the Reagan White House.

Bork was wrong. But since then, even under Democratic administrations, antitrust has all but disappeared.

The Monopolization of High Tech

We’re seeing declining competition even in cutting-edge, high-tech industries.

In the new economy, information and ideas are the most valuable forms of property. This is where the money is.

We haven’t seen concentration on this scale ever before.

Google and Facebook are now the first stops for many Americans seeking news. Meanwhile, Amazon is now the first stop for more than a half of American consumers seeking to buy anything. Talk about power.

Contrary to the conventional view of an American economy bubbling with innovative small companies, the reality is quite different. The rate at which new businesses have formed in the United States has slowed markedly since the late 1970s.

Big Tech’s sweeping patents, standard platforms, fleets of lawyers to litigate against potential rivals, and armies of lobbyists have created formidable barriers to new entrants. Google’s search engine is so dominant, “Google” has become a verb.

The European Union filed formal antitrust charges against Google, accusing it of forcing search engine users into its own shopping platforms. And last June, it fined Google a record $2.7 billion.

But not in America.

It’s Time to Revive Antitrust

Economic and political power cannot be separated because dominant corporations gain political influence over how markets are organized, maintained, and enforced – which enlarges their economic power further.

One of the original goals of the antitrust laws was to prevent this.

Big Tech — along with the drug, insurance, agriculture, and financial giants — is coming to dominate both our economy and our politics.

There’s only one answer: It is time to revive antitrust.

The Cost Of Coal

Just over a year ago I was sitting at my computer in Vermont doing something – tweeting, probably, or maybe checking the baseball scores. All of a sudden an email arrived with a link to a story in the Australian Financial Review: “Revealed: Coal Under Green Attack”

I read it with the mild incomprehension one brings to the politics of any foreign country. I quailed when I saw outraged quotes from various ministers, all of whom were unknown to me, except that I remembered just enough about Australian politics to know Labor was currently in charge, and so these were the rough equivalent of the US Democrats. A man named Wayne Swan, identified as treasurer, was saying that the attack was “a disturbing development”, “deeply irresponsible” and “completely irrational and destructive”. A man named Craig Emerson, apparently the trade minister, said “they are deluding themselves”, adding that the plan, whatever it was, would “mean mass starvation”. The environment minister, Tony Burke, said that the mysterious attack was “simply designed to undermine people who are doing their jobs”. The federal resources minister, Martin Ferguson, was most concerned of all: “Reports of elaborate strategies designed to destroy Australian industries and jobs are very disturbing.” Meanwhile, the head of the Australian Coal Association, Nikki Williams, was blaming “offshore bodies” in the US for the plan, adding “we have real concerns for safety”, and the head of Rio Tinto was describing it as “economic vandalism”.

So I was worried. What on Earth were Australian green groups up to? Had police officials uncovered some campaign of sabotage? Had someone done something really stupid that would undermine climate campaigning around the globe? Was there a bomb involved? I was all the more worried because the news accounts made clear that one of my Australian colleagues, Blair Palese, was somehow mixed up in it. She’d never seemed violent to me, but it’s hard to know with people from another culture.

Climate change, after all, is basically a big maths problem, involving the quantity of carbon we want to burn and the capacity of the atmosphere to contain it.

It took me a while to wade through all the stories, one more lurid than the next (“Coal Activists’ Strategy Exposed”; “Minerals Industry’s Fury”) but for the life of me I couldn’t figure out what had caused all the fuss. The secret document obtained by the intrepid reporters appeared to be a funding proposal from Greenpeace and some other groups called ‘Stopping the Australian Coal Export Boom’ that had as its first priority “to get in front of critical projects to slow them down in the approval process”. To do this, it would work to “gradually erode public and political support for the industry” by, among other things, “lodging legal challenges”, providing “training, strategy and support for community groups” and “using a powerful visual communications strategy to tell the story of the impacts of coal and to articulate a different vision for the future”. They had other plans too: hiring “media officers” in Brisbane and Sydney, and perhaps even “organising and amplifying the voices of health professionals so that they play a central role in the debate over the future of coal”.

The reaction from government and industry didn’t make much sense. I’d always thought of Australians as a rough and ready sort of people, not prone to panic. The last time I’d visited, to contest the long-distance ski races at Falls Creek and Perisher Blue, people dismissed all sorts of actual troubles (sleet storms, fender benders) with a cheerful “She’ll be right, mate.” So why were they in such a flurry at the prospect of a “training and mentoring program for community organisers”, a “powerful narrative about the global importance of the Galilee Basin”, and a “large number of different voices combining together into a beautiful symphony”?

Then it occurred to me that perhaps this was the first time anyone had dared to say the obvious out loud: Australia’s massive deposits of hydrocarbons were a menace to the planet, and would have to be left in the ground if the world had any hope of avoiding catastrophic global warming. Maybe this was news to people in the Australian government. If so, no wonder they were shrieking.

Before we get to morality, we need to do some maths. Climate change, after all, is basically a big maths problem, involving the quantity of carbon we want to burn and the capacity of the atmosphere to contain it. All those massive Australian coal deposits are just the remains of old carbon-based life, hundreds of millions of years’ worth of it. Now we’re digging up those aeons and pouring the carbon into the air in the geological blink of an eye. The question is, how much more can we burn before we’re in trouble?

Answering that question requires that you first decide what constitutes “trouble”. The world community, including Australia, has hit on an answer: two degrees of warming. The number was first suggested by a German panel in 1995, at a meeting chaired by Angela Merkel, who was then the German minister of the environment and is now the (conservative) chancellor. It’s not a hard and fast scientific line, of course. “There [are] no hard numbers to support 2 versus 2.2 or 1.8 degrees,” said Josep Canadell, the executive director of the Global Carbon Project. If anything, it appears to be too high a target for comfort, at least for scientists. They point out that, so far, we’ve raised the temperature of the planet just 0.8 degrees, and that’s caused far more damage than any scientist expected. (Eighty per cent by volume of the summer sea ice in the Arctic is gone; the acidity of the oceans has increased by 30%.) James Hansen, a former NASA scientist and the planet’s most prominent climatologist, puts it like this: “What the paleoclimate record tells us is that the dangerous level of global warming is less than what we thought a few years ago. The target that has been talked about in international negotiations for 2 degrees of warming is actually a prescription for long-term disaster.”

Environmentalists tend to agree. Recall the 2009 Copenhagen summit on global warming, which was supposed to solve the climate problem but instead collapsed, making no discernible progress. I was in Copenhagen as a volunteer campaigner lobbying various delegations, and I’d spent most of the two weeks wandering about the vast conference centre with a button in my lapel that read “1.5 to Stay Alive”, part of a campaign mounted by the low-lying nations whose very existence was at risk. Dr Albert Binger, director of the Centre for Environment and Development at the University of the West Indies, emerged as a spokesman for the Association of Small Island States: “Our ports, airports, roads and settlements will no longer be able to survive two degrees,” he said. “Some countries will flat out disappear. You have a problem in the Pacific [with] Kiribati, Tuvalu, islands in Papua New Guinea and Fiji, across Asia [to] the Maldives.”

Australians may be forgiven for having a similar opinion – after all, the slightly-less-than-one degree by which we’ve already raised the global average temperature allowed your recent “angry summer” of flood and fire. Averages hide extremes: all over the world we’re seeing government weather services adding new colours to their charts to describe new conditions. Rather than citing all the records that have fallen across your continent in recent times, it’s probably enough to point out that when you have hundred-year floods every few months, something is seriously out of balance, and that when droughts are crashing koala populations, it’s a signal that something very new is afoot.

It’s not just Australia. Record rainfalls inundate some spot on the globe almost every week (because warm air holds more water vapour than cold, loading the dice for greater downpours), while vegetation in the Arctic has already crept north as much as seven degrees of latitude. As alluded to earlier, new Cryosat data indicates there’s only 20% as much ice in the summer Arctic as there was 40 years ago. It’s worth thinking about: that white sheet once reflected sunlight back out to space, but the blue water there now absorbs it instead, amplifying the reaction. We’ve taken one of the Earth’s biggest physical features and broken it. If that’s what one degree of warming will do, it’s daring to the point of stupidity to find out what two degrees will bring.

Environmentalists and scientists lost that fight. In the end, political realism bested scientific realism, and the world settled on the two-degree target – it’s essentially the only thing about climate change the world has settled on. By 31 January 2010, which was the deadline for signing on to the Copenhagen Accord, 141 countries, representing 87.24% of the world’s carbon emissions, had endorsed the two-degree target, and many more have been added since. Only a few countries, such as Sudan, Bolivia, Cuba, Nicaragua and Venezuela, have rejected it – the signatories include not just the US and China, but also rising powers like India, Brazil, Russia and Indonesia. Not to mention Australia. The official position of planet Earth is that we should not raise the temperature by more than two degrees Celsius.

The next stage of our maths lesson requires finding out how much more carbon we can emit into the atmosphere and still stay below two degrees. Here the answer is easier: a wide variety of computer models have converged on the figure of about 500 additional gigatons of CO2. The number comes with no guarantee that it will keep us below two degrees of warming, just with an 80% chance. Worse odds than Russian roulette, but it’s only our planet.

Still, 500 gigatons is a lot. A gigaton is a billion tons, and a billion tons is incomprehensible. Except we’re producing more than 30 billion tons a year as a planet already, and that number has been growing by about 3% a year. Which gives us about 15 years before we go soaring past the 500-gigaton threshold. To avoid doing that, the computer modelling shows that the world’s carbon emissions would have to peak in 2015 and then come hurtling down. That’s why Australia has enacted its controversial carbon-pricing scheme, in an effort to do its share in keeping the world below that threshold. Australians, like Americans, will still consume vastly more energy per capita than most, but it’s a gesture in the right direction, in helping the world in its great task to get the arithmetic to line up.

Now let’s complicate matters. Let’s factor in these new coalmines, the ones that the various Labor ministers found it so irresponsible and depraved for anyone to organise against. (I’m assuming the Liberal leaders found the plans so horrifying they said nothing that could be printed in a family newspaper.) In fact, let’s just take one set of mines, in Queensland’s Galilee Basin. Those mines contain enough carbon that, were the recoverable coal to be mined and burnt, it would fill up 6% of the remaining buffer between us and two degrees. That valley alone contains about as much carbon as the oil and gas reserves owned by ExxonMobil, the world’s richest company. There are plenty of other coalmines planned for Australia (not to mention, say, the recent shale oil find in South Australia’s Arckaringa Basin, which, according to its promoters, contains as much as 233 billion barrels of recoverable shale oil, more than the estimated oil in Canada, Iran, Iraq or Venezuela, and essentially equivalent to what’s left in Saudi Arabia). At present, Australian coal burnt overseas already produces considerably more carbon emissions than every-thing Australians do at home. A recent report from the Climate Institute shows that if Australia builds up its coal exports as currently planned, it would produce 30% of the carbon needed to push global warming beyond two degrees. By 2020 the country’s coal burnt abroad will be producing three times as much CO2 as all the country’s cars and factories and homes; by 2025, four times. And so on.

In other words, if you were serious about slowing down global warming, you might argue it misses the point to focus mostly on the behaviour of ordinary Australians, and not on the behaviour of Australian mine owners. I don’t wish to be misunderstood: it’s very important that Australia has put a price on carbon, and very important that this measure not be overturned as a result of the next election. It’s a modest start that has had good effects in opening up the debate around the world, and has apparently reduced domestic energy use. It has also spurred development of renewable energy across the continent: by early 2013 the business press was reporting that wind power was now cheaper than coal power in Australia. Credit to Prime Minister Gillard, and credit to the Greens who helped to force her hand. But far more credit to those dastardly schemers trying to “get in front of critical projects and try to slow them down in the approval process”. Getting Australians to rein in their carbon burning counts for something, but it’s at least as important – and in mathematical terms far more important – to rein in the huge expansion of Australia’s coalmines.

If you were serious about global warming, you might argue it misses the point to focus on the behaviour of ordinary Australians, and not on the behaviour of Australian mine owners.

That is to say, individual changes alone won’t make the maths work. It demands structural shifts on a massive scale.

The global coal, oil and gas industry, even before it opens new mines and drills new wells, already has more than five times as much carbon in its reserves as we can burn: equivalent to 2795 gigatons of CO2 against the 500 gigatons even the most conservative governments would allow. We’re already deep in a hole, and the first rule of holes is that when you’re in one, you stop digging.

So let’s consider the arguments, not fully stated but easy enough to parse, that must have undergirded the outrage at the Greenpeace report.

The first would be: “This carbon shouldn’t be held against us. We’re not using it, just selling it.” This is true. Much of the coal is already being burnt in China, and a lot of the new supply, to judge by the companies supplying the financing, is heading for India. But of course the atmosphere doesn’t care where carbon comes from – it mixes freely around the planet in a matter of days. That’s why they call it global warming.

You could, of course, argue that the coal is doing great things in Asia. There’s some truth to it: cheap energy has been one of the factors pulling people out of poverty at a rapid rate. But by now it’s obvious to anyone looking at the air over Beijing that it’s at best a mixed blessing, even before you figure in the climate effects. A study released in March estimated that the smoke pouring from India’s power plants was killing up to 120,000 people annually. Once you include the climate, the damage really mounts. We know that the effects of climate change are likely to hit poor countries the hardest. A World Bank report late last year made it very clear that there was no chance of “development” in a world with fast-rising temperatures. Whereas Craig Emerson might fear “mass starvation” if people “lodged legal challenges” to Australian coalmine expansion, the current thinking of agronomists, expressed in a study by Stanford and University of Washington researchers, is that each degree rise in average global temperature from now on will cut grain yields by 10%. This is an easy enough scenario to contemplate in the US after last summer’s devastating drought. Even the most basic underpinnings of our civilisation, especially in its poorest reaches, are called into question: research released earlier this year by the US National Oceanic and Atmospheric Administration (NOAA) suggested that increased heat and humidity had already cut the ability of human beings to work outside by 10%, a figure that is expected to double by mid century.

If you sell something with knowledge of the damage its consumption will do, you bear some responsibility for that damage.

An analogy with a drug dealer doesn’t strike me as perfect in this case, though, because the whole planet shares, as it were, a vein. India burns the coal, but Australia burns up too.

A second argument of the outraged ministers might be that it won’t do any good if Australia halts its coalmine expansion, because someone else will just take up the slack. Again, there’s a kind of truth here. Greenpeace, for instance, recently published a list of 14 enormous mining projects around the world that would take us past a “point of no return” climatically. Really, almost any one of them is big enough to overload the remaining space for carbon in the atmosphere. Take the tar sands of Canada, a mucky oil deposit in northern Alberta. The oil contained in those sands, and another similar deposit in Venezuela, has more carbon than all the oil we’ve burnt so far in the world, according to James Hansen. That’s why, he explained in 2011, it would be “game over for the climate” if we burnt it on top of all else that we were burning. And that’s why he’s been willing to go to jail twice to try to stop the biggest pipeline aimed at draining those tar sands, the so-called Keystone XL pipe to the Gulf of Mexico. I’ve been to jail twice myself in helping to organise the largest civil disobedience campaign about any issue in the US in 30 years. It’s not completely ludicrous to imagine keeping those tar sands underground – a vast coalition of environmentalists, native Americans, ranchers and farmers is trying to do just that.

Here’s another way of looking at it. Twenty years ago or so, the world’s scientists figured out it was a very bad idea to cut down the Amazon rainforest. A lot of people thought it was hopeless to try to slow the deforestation, but the Brazilian public and their government have actually done a pretty credible job. And this is a poor country with relatively limited options. Consider, by contrast, Australia – highly educated, full of entrepreneurs, plenty of capital. There’s nothing you can figure out how to do except dig up black rocks and send them to China to burn? The only possible way to even hope to persuade the Indonesians and the Kazakhs not to pursue their own mega-projects is to show some restraint in the rich parts of the world, unleash entrepreneurs on a drive for renewables instead, and use the shift as a tool of aggressive diplomacy.

The need to keep all this oil in the soil, all this coal in the hole, is precisely why we need to envision the planet as a planet, not just a collection of nations, each pursuing its own advantage. We’re at a moment when the alternatives seem realistic. Wind power, as I said, is now as affordable as coal in Australia, not to mention the power from the sun that shines on your continent, the geo-thermal power bubbling beneath it and the tidal power at its fringes. Look at Germany, stuck at higher latitudes – yet there were days in the last northern summer when it generated more than half the power it used from solar panels within its borders.

Every ounce of dirty, cheap coal shipped out of Australia prolongs the period when human beings pour carbon into the atmosphere. It undercuts the shift to renewable energy as surely as selling big bags of discount potato chips undercuts the will to diet. There’s no mystery here at all, and that’s why I think the reaction of Australian leaders to the news that someone might oppose the country’s coal expansion owed very little to logic. I’m guessing that it owed a great deal instead to fear: specifically to the fear of what the very rich people who own coalmines can do to a political career.

I don’t know your carbon barons, but ours in the US are pretty awful. The Koch brothers, for instance, are the third and fourth wealthiest people in the country, and much of their fortune comes from the tar sands. They’ve spent incredible sums bankrolling conservative causes and outspoken climate deniers in the US, thus making sure that fossil fuel companies are allowed to pour their waste into the atmosphere for free (a privilege granted to no other business). My sense is that yours may be pretty awful, too. One of the stories I found, as I tried to unravel the mystery of why politicians were so upset at any challenge to coal exports, concerned a mining magnate named Clive Palmer, who explained that the whole plan was actually a CIA plot.

Official Australia seems to be stuck in a bizarre state of denial, the kind where you acknowledge that you have a problem, but not that you need to do anything about it.

As it turns out, Australia is not just a bunch of coal barons. That Greenpeace report was not the first time anyone had raised the issue of Australia’s coalmines, even if the reaction of Labor politicians made it sound that way. The lucky country has also yielded alternative energy entrepreneurs and engineers, like Martin Green and Shi Zhengrong. Your Investor Group on Climate Change is one of the world’s biggest and most engaged. Your activists include some of the best – the Australian Youth Climate Coalition, as well as people like Simon Sheikh, Tim Flannery, Clive Hamilton and even Malcolm Turnbull. I had a great dinner once with the bald guy from Midnight Oil, and a couple of nights later Peter Singer, the ethicist and animal liberationist, took me to the best vegan restaurant in Melbourne, which was sort of like taking communion with the pope. I even Googled enough to figure out that some folks defended the Greenpeace plan despite the government’s tantrum. The former head of Rothschild Australia, Peter Martin, for instance, said, “The hysterical comments by politicians and companies are clearly self-serving. [Greenpeace and friends] are just trying to protect the interests of future Australians from exploitation.” Which seems about right.

Official Australia seems to be stuck in a bizarre state of denial, the kind where you acknowledge that you have a problem, but not that you need to do anything about it. After the recent farcical Labor leadership spill, I read in the newspapers about the new resources minister, a fellow with the apropos name of Gary Gray. He used to be a climate sceptic, calling global warming “pop science”, but now believes that there is “no doubt” about the link between carbon emissions and global warming. He claims “we can address” the problem but not, apparently, by changing anything we’re doing now. He wouldn’t, he said, be any different from his predecessor, or indeed his successor should the Liberals prevail in the next election. “I fit very comfortably in that vein,” he said. Yes, that will be the same vein mentioned earlier: the one the planet shares.

I understand why no one in power actually wants to take on these questions. It is absolutely true that getting off coal and gas and oil will be hard, perhaps the hardest transition civilisation has ever forced itself through. It’s true that for Australia it will mean rethinking what the economy looks like – for instance, by finding new jobs for people now working in the mines: putting up and maintaining solar panels, perhaps, or building windmills, which involves transferable skills from boilermaking to welding. It will mean changes in the way all of us behave from day to day. It will require true global diplomacy, since no country can conquer climate change on its own.

But it will require, first and foremost, telling the truth about where we stand. The truth is that Australia’s coal has to stay in the ground, along with Canada’s oil, and the huge reserves of gas in the US, and so on. If that carbon is poured into the atmosphere, the equation laid out above won’t work, and the planet will overheat disastrously. It’s climate change, not protest, that will cause “mass starvation”, raise “real concerns for safety” and count as “economic vandalism”. You could almost say it’s “completely irrational and destructive”. And yet it’s under way.

The Sustainable Way Forward For Canada’s Energy Sector

Oil seems to make politicians lose their bearings. The get-rich-quick mentality or too-much-to-lose thinking is very hard to overcome.

Thus, two of Canada’s most progressive leaders, Alberta Premier Rachel Notley and Prime Minister Justin Trudeau, have both doubled down recently on Alberta oil sands and the pipelines to carry them to world markets. Whether Kinder Morgan’s controversial Trans Mountain expansion through British Columbia is built, or the company steps away from the project, remains uncertain. Either way, the truth is that Alberta oil sands have absolutely no place in a climate-safe world. Investing in them is almost surely to be investing in a future bankruptcy.

The story is really quite simple if you are not facing an election soon. In the Paris climate agreement, strongly backed by Mr. Trudeau and Ms. Notley, the entire world has agreed to stay well below 2-degree C warming. To achieve that requires the world to decarbonize the world’s energy system by mid-century. Otherwise, the human-induced emissions of carbon dioxide will break the “carbon budget” and drive warming above the target.

A new study by the UN Sustainable Development Solutions Network (SDSN) shows the sustainable way forward for Canada’s energy industry. Rather than building more oil and gas pipelines to carry Alberta’s high-cost and highly polluting oil sands to world markets, Canada should be building long-distance transmission lines to carry zero-carbon electricity to U.S. markets. In that way, Canada would honour its commitment to the Paris climate agreement and avoid losing billions of dollars on foolish, dead-end projects in the meantime.

There are overwhelming reasons to honour the Paris climate agreement. Even with the amount of global warming to date (1.1 degrees C above the preindustrial average temperature), the world is experiencing record hot temperatures, devastating heat waves, droughts, extreme floods, and increasingly frequent high-intensity storms and hurricanes. Climate attribution science links these extreme events to human-induced warming. With two degrees or more of warming, the world could well experience a devastating rise in the ocean level, as well as devastating losses and dislocations from crop failures, temperature-linked diseases, invasive species, forest fires, and mega-storms.

For these decisive reasons, the world will rapidly shift away from fossil fuels toward renewables. And herein lies the rub for Canada. The world already has vastly more proven reserves of oil and gas than it can safely burn, and a glut of reserves at far lower production costs than Alberta’s oil sands. The marginal costs of the oil sands are typically estimated to be around US$60 per barrel, yet the world will find itself awash in US$30-per-barrel oil as world demand is cut back in the future. There is no way that Alberta’s oil will maintain a profitable niche in a world that is ending its dependence on oil.

One impulse wants to say to Kinder Morgan and TransCanada, “Okay, build the pipelines. Then we will bankrupt you.” But admirers and friends of Canada should speak honestly to friends. “Don’t waste your hard-earned money on the Trans Mountain and Keystone XL pipelines. Spend your money on sustainable projects tapping Canada’s abundant zero-carbon energy.”

Canada is already moving rapidly to a zero-carbon future. As of 2015, two-thirds of Canada’s power generation was from renewable sources, mainly hydro power. The share of renewables in Canada’s power generation is already among the highest in the world, exceeded only by Norway, New Zealand, Brazil, and Austria, and roughly the same as Denmark. Yet far more is possible.

Canada has so much untapped zero-carbon energy that it can be a major exporter to the United States. And, as a bonus, Canada can provide energy storage services to the United States by deploying the hydroelectric reservoirs as giant storage “batteries” for an interconnected Canada-U.S. power grid. When an excess of intermittent renewable energy such as wind power is to be stored, the reservoirs are allowed to fill. When the stored energy is to be utilized, perhaps because of seasonally low wind and solar power, the hydroelectric reservoirs are lowered to produce more hydroelectricity for the Canada-U.S. grid.

This is the powerful conclusion of the new study of energy decarbonization of the U.S. northeast. The UN SDSN teamed up with Hydro-Québec and an expert energy modelling firm, Evolved Energy Research, to examine the best strategy for the U.S. northeast to move to a zero-carbon future by 2050. The basics of decarbonization are clear enough. To slash carbon-dioxide emissions we will need three major energy transformations: much higher energy efficiency, the generation of electricity from zero-carbon energy sources, and the mass electrification of automobiles, heating of buildings, and industrial processes. (Some other sectors, such as aviation and shipping, will probably rely on synthetic liquid hydrocarbons produced using renewable energy).

This decarbonization, in principle, could be accomplished in the U.S. northeast by deploying American renewable energy. Yet the study shows the huge advantage to both the United States and Canada of working together to supply much of the zero-carbon energy from Canada’s hydroelectric potential, and to store excess flows of renewable energy in Canada’s hydroelectric reservoirs (just as Denmark stores its excess wind power in Norway’s hydroelectric reservoirs). The study shows that the cost of decarbonizing the U.S. northeast is reduced by more than US$4-billion a year by greatly expanding the grid connection with Quebec’s hydroelectric power and storage capacity.

Herein lies the real future for both Canada and the United States in energy competitiveness. Rather than building pipelines that will soon be shut, Canadians and Americans should be building a smart grid to carry renewable energy between the two countries. Canada’s renewable energy is vast right across the country. Alberta, fortunately, has vast wind and hydroelectric power potential to enable the province to continue to be a major exporter of energy, only this time with zero-carbon energy that is sustainable for the long haul.

With Donald Trump trying to break the Paris climate agreement and championing fossil-fuel development, it may seem convenient to Canada’s politicians to go along with the U.S. President’s fossil-fuel recklessness. Yet Mr. Trump will be gone and human-induced climate change will remain. Canada is clever enough to look beyond Mr. Trump to its true long-term interests and those of the world.